The combined 2019 executive pay for Ford Motor Company’s top six executives was $70 million. Ford’s annual net income was $47 million. Does that seem right? When you consider that Ford’s annual profits were down $3.7 billion that’s how it ended up like this. Today, Ford has a whole new set of problems it has no control over. Back in 2019, its problems were much of its own making. Remember the terrible Ford Explorer launch? Or how about the warranty costs that ended up costing it billions of dollars? Those who own Ford stock should be blowing gaskets over the numbers.
In 2019 GM’s profits dipped from $3.2 billion to $3 billion
So, with the decisions made in 2019 should those at the top give rather than receive? After all, GM’s profits dipped from a pre-tax profit of $3.2 billion in 2018 to $3.0 billion for 2019 in spite of having to endure a 40-day UAW strike.
According to the Detroit Free Press Ford was shelling out money left and right. In 2019 it restructured one-time pensions costing it $2.2 billion. Ford calls it a “bookkeeping adjustment.” It is paying $47 million to Ford Focus and Fiesta owners over a class-action lawsuit over its defective transmission debacle. Ford also just notified over two million consumers that they’ll receive financial relief to help with unemployment due to the coronavirus crisis. That will be a financial drain throughout 2020.
There’s more bad news for Ford coming in 2020
There is more bad news coming for 2020. Of course, its plants have been shut down since March. Two of its most important products; the Bronco and new F-150 were due to be launched this year. It’s sold out Mustang Mach E was scheduled for customers to receive it by the fall. Now that development and assembly plant schedules have been altered will customers be willing to wait longer to receive their Mustang EV?
Jim Hackett, Ford’s President and CEO says, “What is particularly disappointing is the primary reason for that shortfall was our operational execution.” But that didn’t stop Ford from giving its top executives full salaries, incentive bonuses, stock, and expense piggy banks. From figures filed with the SEC here’s the pay that was doled out to each executive last year: CEO Jim Hackett: $17.36 million; Executive Chairman Bill Ford: $16.76 million; CFO Tim Stone, who took over the role in June: $8.32 million; President, New Business and Technology and Strategy: $8.36 million; President Automotive Joe Hinrichs: $11 million.
To be fair Ford invests in development and products that don’t see a return for years
To be fair manufacturers have to invest in development and products that take years to return a profit. Sometimes the money going out in those cases can’t be spread out evenly. But if investors were expecting a return on the compensation given to CEO Hackett since he came on board in 2017, they’re in for a shock. Over those three years, the return on over $50 million in pay to Hackett has been minus 26%.
It is obvious that CEO compensation is not based on company performance. Ford will release Q1 2020 earnings tomorrow.